Download Interaction of Economic and Natural System

Interaction of Economic and Natural Systems
Although it may appear self-evident, the actual recognition of how the (human) economic system and
natural systems interact is important to promote more sustainable policies. Traditionally, in classical
economics the economic system was perceived to operate outside of any natural system constraints;
any required economic input was identified by its economic value according to laws of supply and
demand and was assumed to be perfectly substitutable. If the supply of something became scarce, its
price would soar and the market, together with new technology, would find a substitute. By this line of
reasoning and market economics, it was perfectly okay to hunt the beaver to near extinction because
there could be another animal skin pelt substitute to replace it.
Or conversely, if the supply of something were abundant and its price were low, it is perfectly rational
and acceptable to consume that resource in the process of producing something more economically
valuable. This is presently the situation, upsetting to a number of people, with the production of oil from
tar sands in Canada. To obtain a more economically valuable petroleum product, large amounts of
natural gas, a uniquely valuable resource for the long-term, are being consumed because of its low
current market value.
The problem, then, with classical economics is that nothing has any inherent value other than its current
market value; and the practice of discounting the future provides further disincentives for sustaining
anything for the future. Furthermore, the economic cost of producing an item is sometimes less than
the true cost because “external costs” , such as the costs of pollution to society resulting from the
producing the item, are not included.1
In earlier times, when global population and consumption were limited, these systematic deficiencies
could perhaps be overlooked. Now, however, as population is expected to reach eight billion and
standards of living are increasing for a global population, the survival of much of life itself and the
quality of life will be dependent upon a clear understanding of how the economic system and natural
system interact at many geographic scales, ranging from local to global. The figure below denotes the
general conceptual interaction. From the standpoint of sustainability, it is important to recognize that
the economic system does not operate in a vacuum; it is dependent upon the natural system and there
are important feedback impacts between the two. (A detailed discussion of this interaction is presented
in the writing by Muschett entitled “An Integrated Approach to Sustainable Development” found
elsewhere on this website).
A new alternative vision of economics is emerging: ecological economics which envisions the economic
system as operating within and not apart from the natural system and seeks to make the science of
economics more responsive and sustainable. (For additional information contact the International
Society of Ecological Economics).
1
This discrepancy leads to an “unlevel playing field” and distortions in the marketplace. For example, the cost of
electricity generated from fossil fuels has traditionally had a competitive advantage over renewable solar and wind
electricity because the costs of climate change resulting from the use of fossil fuels are not included.
Interaction of Economic and Natural Systems: Up Close and Personal
Because the demands of the economic system can place severe impacts upon the natural system,
including the depletion of natural resources, severe generation of pollution and greenhouse gases, loss
of habitat and the extinction of species, it is important that consumer lifestyles reflect an environmental
ethic including:
(1) a better appreciation and understanding of the interconnectedness of all life
(2) a reduction in unneeded and unsatisfying material consumption
(3) more widespread and creative practices of waste reduction, including reusing and recycling and
composting of food wastes (which reduces the landfill generation of the extremely potent
greenhouse gas methane)
(4) increasing utilization of energy efficiency improvements for households and transportation
(5) trying to respect Ecosystem Integrity and Environmental Limits as noted previously.